Finance & Capital Market

Kuwait markets positive in July on non-oil sector rebound

Kuwait's markets ended positive for July owing to a rebound in the non-oil sector activity, discovery of new oil reserves, and the news pertinent to the government planning to establish a secondary market for trading government bonds, according to Kuwait Financial Centre (Markaz). 
 
GCC markets remained optimistic, supported by the positive start to the second quarter earnings season in 2024, while US equities were down for the month, weighed by technology stocks, even as inflation continued to ease, stated Markaz in its monthly market review report for July.
 
Kuwait equity market index gained 4.4% for the month, extending the yearly gains to 6.2%. 
 
The value of real estate transactions in Kuwait rose by 27% y/y to KD853 million ($2.78 billion) in Q2 2024 owing to sizable one-off deals across the main three segments. However, prices in the residential segment continued to moderate, with prices falling by 3.9% y/y in Q2 2024, said Markaz in its report.
 
Kuwait’s inflation (CPI) eased to 2.8% y/y in June, the slowest pace since November 2020, down from 3.2% y/y in the previous month. The food and beverages component moderated compared to the previous month, but remained elevated at 5.6% y/y in June while growth in housing prices witnessed a notable slowdown to 0.9% y/y, it added. 
 
The GCC country’s non-oil GDP bounced back in Q1 2024, rising 4.7% y/y compared to a 2.3% y/y contraction in the previous quarter driven by strong growth in the manufacturing sector, according to Kuwait CSB. 
 
The discovery of 3.2 billion barrels of oil reserves by KPC (Kuwait Petroleum Corporation), equivalent to Kuwait’s oil production over three years added to the positive investor sentiment as higher possible revenue from oil could help in easing budget deficits in the future, stated Markaz in its report. 
 
Kuwait government has undertaken preliminary steps to establish a market for trading government bonds, according to Arab times. This initiative is expected to support capital expenditure and create a strong ecosystem for debt issuance and trading in Kuwait.
 
Kuwait banking stocks rose 5.4% during July supported by positive Q2 2024 earnings results. Among banking stocks, Al Ahli Bank of Kuwait (ABK) gained the most at 13.3% during the month following the earnings announcement.
 
ABK registered net profits of KD29.06 million ($95.8 million) in H1 2024, a growth of 22% y/y. NBK and KFH rose 5.7% and 4.5% respectively in July. KFH recorded a net profit of KD 341.2 million for H1 2024, an increase of 2.3% y/y. 
 
NBK posted a net profit of KD 145.8 million in Q2 2024, up 3.3% y/y due to higher operating income and lower provisions, that were partly offset by higher operating expenses and higher taxes. Among Premier market stocks, Gulf Cables and Electrical Industries Group gained the most at 21.0% during the month.
 
According to Markaz, GCC markets were mostly positive during the month, with S&P GCC composite index registering a gain of 3.9% for the month. 
 
GCC equity indices, except Oman and Bahrain, registered monthly gains as strong corporate earnings coupled with rising expectation of US Fed rate cut in September lent support to the markets, it added. 
 
However, the total project awards in the GCC witnessed a decline of 19.7% y/y to $51.7 billion in Q2 2024 due to the unprecedented slump of project awards in Qatar coupled with steep fall in UAE contract deals, as reported by Zawya.
 
Dubai and Abu Dhabi equity indices gained 5.9% and 3.1% respectively during the month, primarily driven by the performance of banking and real estate stocks.
 
The market is expecting strong loan growth and higher NIMs for banks in the region in the near term.
 
The share price of FAB rose 4.7% during July as the bank posted a net profit of AED 4.26 billion in Q2 2024, beating analyst estimates. 
 
Emaar Development and Emaar Properties surged 6.1% and 5.2% respectively during the month supported by strong execution and healthy pipeline of projects in H1 2024. Aldar properties’ share price rose 18.1% driven by the appointment of the new CEO. 
 
The Saudi Tadawul index rose 3.7% during July despite IMF’s downward revision of Saudi Arabia’s GDP growth by nearly one percentage point to 1.7% for 2024 due to oil production cuts. 
 
Saudi Aramco share prices fell 1.1% owing to expectations of a fall in Q2 2024 profits due to lower production, while Qatar equity index registered a gain of 1.9% despite the steep fall in natural gas prices, it added.

Finance & Capital Market

No plans for income tax says UAE minister

The United Arab Emirates has no plans to start income taxes, though the country has introduced corporate tax, Economy Minister Abdulla bin Touq Al Marri has said.
 
“There’s a lot of speculation on that,” he said in an interview with Bloomberg News at the World Economic Forum in Davos, Switzerland. 
 
“It’s not on the table. It’s not in the rooms of discussions. It’s not being discussed in the meetings. It’s not coming anytime soon,” Al Marri said.
 
Meanwhile, he criticised the European Union for keeping the country on a “black list” of countries with strategic deficiencies in combating illicit money flows.
 
“The question of the EU black list, this is a question for them,” he said. “I do not understand how the UAE is still on the black list.”
 
The UAE is making diplomatic efforts to resolve the situation, he said, without giving any indication of whether the EU’s stance is shifting.
 
The EU regularly assesses third countries’ efforts against money laundering and the financing of international terrorism and has yet to drop the UAE from its black list. That’s despite the Paris-based Financial Action Task Force — a global body — removing the UAE from its “gray list” last year.
 
“The UAE managed to get out of the gray list in record time, based on assessment and based on people who come on site and scrutinize your systems for weeks and months,” said Al Marri.
 
The minister also expressed concerns about an EU directive that will potentially penalise imports from countries that don’t allow for trade unions.
 
“You can’t dictate what other countries do with their labour systems and management,” he said. “What works in the UAE works.”
 
It is “really going to challenge” the oil and natural gas industries, he said.
 
The UAE, an Opec member, ships little of its crude to Europe, according to data compiled by Bloomberg. But it is planning to export more of its liquefied natural gas there.
 
Qatar, one of the world’s biggest LNG producers, has voiced similar criticism about the EU’s climate directives and said they may result in less fuel being sent to the bloc.
 
The EU didn’t immediately respond to a request for comment on both issues. -TradeArabia News Service
 

Finance & Capital Market

Burgan Bank to acquire Bahrain's United Gulf Bank

Burgan Bank, a Kuwait-based conventional bank, has signed of a share purchase agreement (SPA) to acquire 100% stake in United Gulf Bank (UGB), a wholesale bank licensed and headquartered in Bahrain, from United Gulf Holding Company (UGH) for $190 million. 
 
This transaction is in line with the bank’s strategy to diversify its asset portfolio by focusing on stable and less fluctuating markets, particularly Kuwait and the wider GCC region, the bank said. 
 
The agreement follows Burgan Bank’s receipt of all required regulatory approvals in both Kuwait and in Bahrain. The two parties will commence the ownership transfer process, the last step in this transaction, with expectations to be completed within the first quarter of 2025, it said.
 
UGB has a wholesale banking license in Bahrain with an ‘Islamic window’ and is supervised by the Central Bank of Bahrain (CBB). It also owns a 60% stake in Kamco Investment Company (Kamco Invest), an investment company licensed and regulated by the Capital Markets Authority - Kuwait (CMA) and the Central Bank of Kuwait (CBK). 
 
Tony Daher, Group CEO of Burgan Bank, said: “The acquisition marks a significant milestone for our Group and is aligned with the Bank’s strategic pillars of diversifying its assets, enhancing its competitiveness and building new income streams. This acquisition provides Burgan with an opportunity to tap into key high-growth sectors of Islamic financing and investments, while creating significant cross-selling and up-selling opportunities, in addition to various integrational synergies.”
 
Furthermore, the transaction will strengthen the bank’s offerings to its clients, providing them with access to the Kamco Invest platform. Kamco Invest currently offers a comprehensive range of investment solutions covering asset management, investment banking and brokerage. It is considered one of the largest asset managers in the region with AUM of ~$16 billion and has notable presence in key capital markets, including Saudi Arabia, the UAE, and the UK. 
 
“The acquisition will solidify the business relationship between Burgan Bank and Kamco Invest, enabling both entities to deliver a seamless and integrated suite of financial services, leveraging their combined expertise to enhance client experiences and meet their diverse and evolving financial needs effectively,” added Daher.
 
Daher explained that Burgan Bank continues to be driven by its vision to become the most modern and advanced bank in Kuwait in the ambitious steps it takes to achieve sustainable growth and expansion. The Bank’s confident strides are further supported and guided by its focus on strategic priorities – most notably the redistribution of assets – keeping pace with digital transformation, developing human capital, and achieving environmental, social, and governance (ESG) excellence. Together, these efforts aim to provide a distinctive banking experience for Burgan’s customers that lives up to their aspirations and meets their needs. This latest acquisition comes following the sale of the Bank of Baghdad and the partial sale of Burgan Bank Turkey in 2023, which is a testament to Burgan’s commitment to deliver on its strategic pillars. 
 
Daher concluded: “The key priority for Burgan now is to deliver on its envisioned operating model for UGB, which would be focused on generating onshore client revenues and serving clients in Bahrain, as well as supporting the Bank’s existing clientele through enhanced product and services offerings.” – TradeArabia News Service